When Cathy and John Barton purchased their life insurance policies ten years ago, they thought they did things the right way. The Bartons determined their own insurance needs, taking into account the mortgage on their modest home, college education costs, and living expenses. Well, that was then. . .and this is now. Recently, the Bartons reevaluated their insurance needs and were surprised to discover their insurance coverage was inadequate. How could this be? The answer is really quite simple-inflation.

Because inflation affects our future purchasing power, it also affects our future life insurance needs. For families like the Bartons, inflation means that what may have been adequate life insurance coverage several years ago, may no longer be sufficient. With this in mind, let`s take a quick look at three of the more common life insurance needs that are often affected by inflation. Purchasing a new home with a mortgage. Until recently, it seemed that once you bought a house, you stayed in it forever. Times have certainly changed. Today, Americans are mobile. Increasing employment opportunities and dual incomes have changed the dynamics of family finances. In many cases, a growing family can now afford paying a mortgage on a lot more "house" than at anytime in the past. Does this trend minimize the reality of inflation and the rising costs of homeownership? Not at all. The fact is, escalating real estate prices have translated into larger mortgage loans. Therefore, if you`ve recently purchased a home, consider increasing your life insurance to cover your new mortgage. College education costs. If you`re planning on sending your children to college, you`re probably concerned about the rising costs of higher education-and, rightfully so! The average annual cost for attending a four-year, private college has doubled over the last twenty years! To combat rising college costs, factor inflation into your college savings plan. In addition, make sure you have a contingency plan in place-that is, adequate life insurance protection in the event of an untimely death. As you evaluate your education savings plan, consider increasing your life insurance coverage so that it best reflects the future cost of education. Everyday expenses. Shopping at the grocery store. . .pizza on Friday nights. . .  taking your children to the movies. . .filling up your gas tank. . . replacing the roof on your house. Over the course of time, the costs associated with these necessities and "treats" of everyday life are greatly impacted by inflation. As a result, your family`s future lifestyle could be affected, too. By basing your life insurance needs on your current income and today`s cost of goods and services, you are potentially shortchanging your family`s future. Be sure to include inflation in your life insurance plan to help maintain your family`s current lifestyle.

Keeping Things Up-to-Speed

Determining your current life insurance needs is one thing. But, figuring out how much life insurance you`ll need in the future requires you to pay careful attention to inflation, and how it will affect your lifestyle. This is where regular reviews of your insurance coverage can make a great deal of sense. Set aside some time, at least once every year, and objectively evaluate whether your life insurance plan is keeping up with inflation. Remember, an insurance plan that keeps pace with inflation is much better than one that gets beaten by inflation.

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